How to Prepare for MTD: A 6-Step Action Plan

Why You Need to Act Now

MTD for Income Tax is not optional for those above the threshold. From 6 April 2026, if your qualifying income exceeded £50,000 in the 2024/25 tax year, you must be signed up and using MTD-compatible software. Your first quarterly update will be due on 5 August 2026.

Missing your first quarterly deadline will earn you a penalty point. Missing four in total will result in a £200 fine. The best way to avoid this is to be ready before the tax year starts.

Step 1: Check Whether You Are in Scope

Your qualifying income is the total of your:

• Gross self-employment income (sole trader only -- not limited company dividends or partnership income)
• Gross UK property rental income

If the combined total from your 2024/25 Self Assessment return is above £50,000, you are mandated from 6 April 2026. If it is between £30,000 and £50,000, you will be mandated from April 2027; between £20,000 and £30,000, you will be mandated from April 2028.

If you have not yet filed your 2024/25 return, base your estimate on the previous year's figures. HMRC uses the most recent filed return to determine your status, and will notify you if you are mandated.

Pro tip: Employment income, dividends, savings interest, and pension income do not count toward qualifying income. Only self-employment and property income matter for the threshold calculation.

Step 2: Understand What MTD Requires of You

Before choosing software or setting up records, it helps to know exactly what MTD involves:

• Digital record-keeping: Every business income receipt and expense must be recorded digitally from the start of the tax year
• Quarterly updates: Four submissions per year summarising your income and expenses (not full tax returns -- just running totals)
• Final Declaration: An annual year-end submission by 31 January replacing your Self Assessment return
• Compatible software: All of the above must happen through HMRC-recognised MTD software

If you already keep digital records (a spreadsheet or accounting software), you are ahead of the game. If you still rely on paper records or bank statements, now is the time to change.

Step 3: Sort Your Digital Records

Before April 2026, set up a system for recording every business transaction digitally. You have two main options:

Option A -- Spreadsheet (for bridging software users) Use a structured spreadsheet with columns for date, description, category, and amount for both income and expenses. Taxd provides a ready-made MTD template you can download and use straight away.

Option B -- Connected bookkeeping app (for smart tracking software users) Connect your business bank account to a bookkeeping app like Keptd. Transactions are imported automatically and categorised for you. No manual data entry required.

Whichever option you choose, start recording from 6 April 2026 (or earlier if you want to build good habits now).

Step 4: Choose Your MTD-Compatible Software

All MTD submissions must go through HMRC-recognised software. There are three main approaches:

1. Full MTD software (like Keptd): Handles record-keeping, quarterly submissions, and year-end -- everything in one place
2. Bridging software (like Taxd's bridging tier): You keep your spreadsheet; the software handles the submission to HMRC
3. Agent-managed: Your accountant or tax agent uses their software to submit on your behalf

Consider how you currently manage your records and how much time you want to spend on bookkeeping each quarter. Most sole traders and landlords with straightforward affairs find bridging software or smart tracking more than sufficient.

Browse HMRC's Software Choices page to see the full list of approved products.

Step 5: Register for MTD

Once your software is in place, complete your sign-up:

1. Log in to your HMRC online account using your Government Gateway credentials
2. Select the option to sign up for Making Tax Digital for Income Tax
3. Confirm your income sources and business details
4. Connect and authorise your chosen software

The authorisation step creates a secure link between your software and HMRC. Once complete, your quarterly obligations appear in your software dashboard.

If you use an accountant, ask them to complete the sign-up on your behalf -- they can do this through their Agent Services Account.

Step 6: Know Your Quarterly Deadlines

Once signed up, your four quarterly deadlines for the 2026/27 tax year are:

Set reminders in your calendar now. A well-organised system means each quarterly submission should take no more than 15-30 minutes if your records are up to date.

Quick-Reference Preparation Checklist

• Check your 2024/25 qualifying income -- are you above £50,000?
• Set up or review your digital record-keeping system
• Choose MTD-compatible software and sign up for a free trial
• Register for MTD through HMRC or ask your agent to do it
• Authorise your software to connect to HMRC
• Set calendar reminders for all four quarterly deadlines and 31 January
• Submit your first quarterly update by 5 August 2026

Get Ready with Taxd

Taxd is designed to make your MTD transition as straightforward as possible. Whether you need bridging software to upload your spreadsheet or Keptd to automate the whole process, you can be up and running in minutes.

HMRC-recognised. Award-winning. Trusted by thousands of landlords, sole traders, and expats. Start your free trial today at taxd.co.uk/mtd.